Chapter 7 — Exercises

Work these with a calculator and a blank page. Items marked † have worked solutions in the answers appendix; the rest are for you, your study group, or your branch manager. Every constructed figure in this chapter is labeled as constructed — where an exercise gives you rates or prices, treat them the same way, and remember that the real version of every one of these is your own measured number.

No answers appear in this file.

A. Recall and definitions

7.1 Define lead source and lead conversion, and explain why a lead conversion rate is meaningless unless the stages are defined identically across periods.

7.2 In one sentence each, distinguish a referral partner from a member of your sphere of influence, and give the single characteristic that makes the sphere convert better and run out faster.

7.3 † Name the four stages of §7.1's funnel in order, state the constructed conversion rate the chapter assigns to each transition, and compute the end-to-end contact-to-closing rate.

7.4 What is a database, as this chapter uses the word, and what does it contain that a mailing list does not? Name the specific field category the chapter says produces the most business and is most often left empty.

7.5 Define drip campaign and name one job it does well and one job the chapter says it cannot do.

7.6 What is a builder relationship, and why does the chapter warn that it frequently does not move with you when you change employers?

7.7 † State the three conditions under which an affiliated business arrangement is permitted under RESPA. Which one is the chapter's "recurring wrong answer" on the exam?

7.8 Define co-marketing and state the single test that determines whether a given split is defensible.

7.9 What is a marketing services agreement, and what must be true of the services for the payment to fall inside RESPA Section 8's goods-and-services exception?

7.10 Define past-client retention. Why does the chapter call the database "the only thing you own"?

B. Applied reasoning

7.11 An originator says, "My business is basically all agent referrals." What is the one document that could confirm or refute that, how long does the chapter say it takes to produce, and in which direction does the chapter predict the originator's belief will be wrong?

7.12 † Section 7.1 concludes that a manager asking "how many closings this month?" is asking a question with no actionable answer. Explain why, using the funnel's lag, and state the two questions the manager should ask instead.

7.13 A first-year originator has met six real estate agents in four months, converted none, and concluded that "agent business doesn't work for me." Using §7.3's constructed base rate, explain precisely what is wrong with that conclusion. What would a statistically honest version of the conclusion require?

7.14 The chapter says a new loan officer is "auditioning for the number-two slot," and that the number-two slot gets the hard file. Argue against the chapter's advice to take the hard file first. Then say why the chapter is nonetheless right.

7.15 Explain, to a real estate agent who has just asked you for your rate sheet, why you are not going to send it — in a way that leaves the relationship better rather than worse.

7.16 Section 7.5 warns that a sphere of influence is where fair-lending exposure hides. Restate that argument in your own words, and describe two concrete things an originator can do about it that do not involve using the sphere less.

7.17 † An originator's entire book is company-provided leads. They are producing well and are happy. Identify the risk the chapter says they are carrying, quantify what it would cost them to realize it, and state what they should be doing with the second half of their week.

7.18 Why does the chapter insist that "files under contract" be tracked but never targeted? Name the specific behavior a target on that metric produces, and who it costs you.

C. Funnel and pipeline calculations

7.19 † An originator needs to close 3 loans a month. Their measured rates are: contact → conversation 35%, conversation → pre-approval 55%, pre-approval → application 45%, application → closing 78%.

(a) Compute the end-to-end contact-to-closing rate. (b) Compute the required monthly volume at each of the four stages. (c) Assuming 21 business days a month, compute the required new contacts per business day.

7.20 Using the same originator as 7.19, their turn time is 48 days and pre-approved buyers sit an average of 1.5 months before going under contract or falling away. Compute the number of files in process and the number of pre-approved buyers shopping at steady state. How many households believe this person is their loan officer at any given moment?

7.21 † A database contains 180 households and produces 0.09 closings per household per year. Compute the annual closings from the database alone, and the gross compensation at \$3,250 per closing. Then compute what happens to both figures if the rate is actually 0.05.

7.22 Rebuild §7.4's compounding table for an originator who closes 18 loans a year from new sources rather than 24, at the same 0.11 database factor. Carry it to year five. By what percentage has total production grown, and how does that percentage compare to the chapter's?

7.23 An originator wants \$120,000 of gross compensation. Their compensation is 125 basis points and their average loan amount is \$275,000. How many closings does that require, and what does §7.1's constructed 6.4% end-to-end rate say about the annual contact volume needed?

7.24 Section 7.1's time budget totals 25.4 hours a week against a 45-hour week. Explain what the chapter says fills the remaining hours, then propose a specific reallocation that would move the originator from 24 closings a year toward 36 — and state what you would give up.

D. Cost, conversion, and the purchased-lead decision

7.25 † A vendor offers shared leads at \$55.00 each. Your compensation is 90 basis points and your average loan amount is \$310,000.

(a) Compute gross compensation per closed loan. (b) Compute the break-even lead-to-close conversion rate. (c) Your measured conversion after a bounded test is 1.20%. Compute leads per closing, lead cost per closing, and margin per closed loan. (d) State the decision and one sentence of reasoning.

7.26 Using 7.25(c), assume each lead consumes an average of 16 minutes of follow-up across its life. Compute the hours of follow-up per closed loan and the margin per hour. Interpret the sign of your answer for a reader who has never seen this arithmetic.

7.27 † An originator spends 18 hours a month working purchased leads. Using §7.3's constructed cost of 54 hours per producing agent partner, and a mature partner worth \$14,000 a year in gross compensation, compute the annual opportunity cost in forgone partners and in dollars. Then discount the result to a 25% realization and state whether the conclusion changes.

7.28 Figure 7.1 shows purchased leads consuming 60% of the marketing budget to produce 8% of the closings. Write the three-sentence recommendation you would make to this originator — including the one thing you would not do immediately, and why.

E. Relationship value

7.29 † A buyer's agent sends you 4 buyers a year, of whom 3 close. Her average loan amount is \$285,000** and your compensation is **110 basis points**. It took **\$480 in cash and 36 hours to build the relationship, and you expect it to last 5 years.

(a) Compute annual gross compensation from this agent. (b) Compute five-year gross compensation. (c) Valuing your hours at \$100 each, compute total investment and the return multiple. (d) Compute the acquisition cost per closed loan and compare it to the \$2,666.67 figure in §7.7.

7.30 Extend 7.29 by adding a second-order referral assumption of your own choosing. State the assumption explicitly, show the arithmetic, and then argue honestly about whether your assumption is defensible or flattering.

F. Write it

7.31 † Write the outreach. Draft the message you would send to request a first meeting with a real estate agent you have never met, who closes 20 transactions a year and already has a lender. Maximum 90 words. It must not ask for a referral, must not mention your rates, must give her a reason to reply that is about her, and must be something you would actually send.

7.32 Write the annual review. Draft your version of §7.4's annual-review call for a past client who closed 14 months ago at 6.625%, using a specific fact from their file. Then write the two-sentence note you would put in the CRM immediately after the call.

7.33 Write the memo. Using the Fulton Avenue facts — a CPA who told the borrower "about \$9,500 a month," against a qualifying income of \$8,916.67 — draft the opening paragraph of the qualifying-income memo described in §7.6. It must not say or imply that the CPA is wrong.

7.34 Write the difficult call. A producing agent has sent you nothing in ninety days. Write the opening three sentences of the call. Then write what you will say if she tells you the truth, and what you will say if she tells you she has "just been slow."

G. Compliance judgment

7.35 † A real estate agent proposes that you split a \$1,800-per-month digital advertisement 50/50. You examine the creative: the agent's photo, brokerage logo, and four active listings occupy roughly 70% of it; your name, company, and NMLS ID occupy the remainder.

(a) Compute your defensible proportionate share in dollars. (b) Compute the monthly and annual difference between that and the proposed split. (c) State the statute in play, the direction the thing of value is moving, and exactly what you do next.

7.36 A brokerage offers you a marketing services agreement: \$2,500 a month to display your materials in their lobby, include you in their monthly client newsletter, and give you fifteen minutes at their weekly sales meeting. Draft the six questions you would ask before signing, and identify which single answer would end the conversation immediately.

7.37 An agent posts a listing advertisement featuring your photo, name, and NMLS ID. She paid for all of it. She tells you, "Don't worry about it — there was space anyway." Analyze this under RESPA Section 8, identify which party is at risk, and write the two sentences you say to her.

7.38 Your branch manager tells you an arrangement is fine because "everyone in this market does it." Explain, in writing, why that is not a legal analysis — and describe what you do if the manager insists.

7.39 You want to post a short video explaining that rates moved this week. List every compliance consideration from §7.8 that applies, and then write a version of the caption that satisfies all of them.

H. NMLS-style questions

7.40 † A loan officer pays a real estate agent \$400 a month under a written contract to display brochures in the agent's office. The brochures are never actually displayed. Which statement is most accurate?

(a) The arrangement is permissible because it is in writing. (b) The arrangement is permissible because \$400 is a reasonable amount. (c) The arrangement likely violates RESPA because no service was actually performed. (d) RESPA does not apply because no consumer was harmed.

7.41 RESPA Section 8 prohibits which of the following? Select all that apply.

(a) Giving a thing of value for the referral of settlement service business. (b) Accepting a thing of value for the referral of settlement service business. (c) Splitting a charge for a settlement service where no service was performed for the split. (d) Paying an employee a salary.

7.42 A homebuilder refers buyers to a lender it partly owns. Which fact would most clearly create a RESPA problem?

(a) The relationship is disclosed to the buyer at the time of referral. (b) The builder receives a return on its ownership interest. (c) A closing-cost incentive is available only if the buyer uses the affiliated lender and the buyer is told they must. (d) The affiliated lender's rates are slightly higher than a competitor's.

7.43 Under the S.A.F.E. Act, a loan originator's advertising must include which of the following?

(a) The originator's home address. (b) The originator's NMLS unique identifier. (c) The lender's warehouse line provider. (d) The current interest rate.

7.44 A social media post states "30-year fixed at 6.625%!" and nothing else. The primary regulatory concern is:

(a) RESPA Section 8. (b) Regulation Z's advertising provisions and triggering terms. (c) The Fair Credit Reporting Act. (d) The Homeowners Protection Act.

I. Loan File extension

7.45 † The Loan File. Return to the Linden Street file. The buyer's agent has now closed five files with you and refers, on the chapter's constructed assumptions, six buyers a year of whom five close.

(a) Recompute the relationship's annual value using your own compensation plan rather than the chapter's constructed \$3,250, and state your plan's terms explicitly. (b) Compute what percentage of a 24-loan year this single relationship represents. (c) Write the one-paragraph plan for partner number six, with a named target profile, a first action, and a date.

7.46 The Loan File, extended. The agent calls at 8:40 Wednesday asking for a pre-approval by 2:00 p.m. Using §7.1's inventory arithmetic, argue both sides of this question: is dropping everything for this request good pipeline management, or is it the behavior of an originator with no system? Take a position and defend it with a number.

7.47 The Loan File, counterfactual. Suppose this file had come from a purchased lead instead of the agent. Using §7.7's constructed figures, compute the difference in acquisition cost, and then name three things about the transaction — not the cost — that would likely have been different.